1. Field of the Invention
The disclosed invention relates generally to conducting electronic auctions, and in particular to a method submitting multi-variable bids into an electronic auction.
2. Description of Background
Procurement of goods and services has traditionally involved high transaction costs, especially information search costs. The advent of electronic commerce has introduced new methods of procurement that lower some of the transaction costs associated with procurement. Electronic procurement, in particular business-to-business electronic commerce, matches buyers and suppliers and facilitates transactions that take place on networked processors.
Four models of online procurement have been developed: catalog, buyer-bidding auctions, seller-bidding auctions and exchange marketplaces.
The “catalog” model was an early form of online electronic procurement. Initially, electronic catalogs were developed primarily by sellers, typically suppliers, to help customers obtain information about products, and order supplies electronically. These first electronic catalogs were single-source; i.e. they only allowed customers to obtain information and products from that supplier.
Although these first electronic catalogs greatly reduced the information search costs associated with procurement, customers were disadvantageously “locked in” to one supplier at each electronic catalog. Customers were thus unable to compare a number of competing products in a single catalog. Therefore, certain suppliers with single-source catalogs began including competitors' products in their systems. The inclusion of competing products in electronic catalogs reduced procurement information search costs even further. By offering competing products, electronic catalogs became “electronic markets”.
Many of these catalogs, however, are biased toward the supplier offering the electronic catalog, and it was thought that procurement costs could be lowered further through an unbiased market. Therefore, third-party “market makers” developed markets for many standard products and services, which were intended to be unbiased markets. By having a market maker develop a market for certain products by offering an unbiased electronic catalog, procurement costs are further lowered by promoting competition between suppliers as well as reducing information search costs for buyers.
Electronic commerce using the electronic catalog model typically involves one buyer and one seller at a time. When many buyers compete for the right to buy from one seller, a buyer-bidding auction model, or forward auction is created.
In a forward auction, various goods or services may be simultaneously placed for auction. As in an offline auction, bid prices start low and move upward as bidders interact to establish a closing price. Typically, the auction marketplace is one-sided, with one seller and many potential buyers, although multiple-seller auctions are possible.
Catalog and buyer-bidding auction models, however, have limitations and do not work in every situation. For example, it is difficult for a supplier to publish set prices in a catalog for custom products. Therefore, when a buyer requires a custom or hard-to-find product, pricing for that product typically will not be found in a catalog. Likewise, it is difficult to specify a custom product and identify buyers who might use that custom product for a buyer-bidding auction. Additionally, there may be only one buyer interested in a custom product, such that a buyer-bidding auction may not be applicable in all cases. Thus, there are fewer suppliers and no standard product and pricing information available for the buyer of custom industrial products.
Referring again to the cost of traditional procurement, and particularly procurement of custom products and services, when a company required a custom product, a buyer for the company would typically procure the product by searching for potential suppliers and then acquiring price quotes from the potential suppliers for the needed custom product. The search tended to be slow and random, and typically relied heavily on personal relationships. The costs associated with locating vendors, comparing prices, and negotiating a deal were therefore large. The cost of switching suppliers is also very large, such that an incumbent supplier's quoted price was most likely not the lowest price he could offer because the incumbent supplier knew the buyer would face switching costs to use another supplier. As an additional consequence, new suppliers had a difficult time entering the market.
Therefore, supplier-bidding auctions for products and services defined or specified by a buyer have been developed. The assignee of the present application has developed a system in which sellers downwardly bid against one another to achieve the lowest market price in a supplier-bidding auction.
Traditional online auctions have focused on price as the sole variable upon which the auction competition is based. In a typical business-to-business situation, however, many variables or parameters may be considered in combination with a bidder's proposed price. For example, in the negotiations for a supply contract, a buyer will compare various proposals not only on the basis of price but also on the basis on location of the supplier, contract term length, etc. In these situations, the sponsor has traditionally negotiated with each bidder independently, as the bid prices do not account for these additional variables, and therefore cannot be readily compared.
The assignee of the present invention has developed a method of transforming multi-variable bids into comparable units of measure in real-time, as disclosed in copending U.S. patent application Ser. No. 09/282,157, which has been incorporated by reference. This method of transforming multi-variable bids allows for a competitive auction of goods and services that traditionally could not take advantage of natural auction dynamics. This process performs a transformation function on all of the variables or parameters of the bid to calculate one comparative bid.
In both forward and reverse auctions, the dynamics of bidding in an auction work to the advantage of the sponsor of the auction. For example, in a forward auction, bidders may bid more than they would have paid otherwise for a product or service during the final “going, going, gone” stage of the auction because of the time pressure and excitement of the auction atmosphere, and the sponsor of the auction, in this case the seller, benefits. Likewise, in a reverse auction, bidders may bid less than they would have bid on a supply contract outside the auction, and the sponsor, this time the buyer, benefits.
To take full advantage auction bidding dynamics, an electronic auction should facilitate bid entry. If the process of submitting a bid to the electronic auction is difficult or cumbersome, the bidder may be less likely to make a bid. Additionally, in the final stages of an auction, bids are made very rapidly, and a bidder must be able to enter a competitive bid quickly and easily in order to “beat the clock”.
Additionally, as discussed above, an auction may allow for multi-variable bidding. For example, in a reverse auction for custom industrial supplies, a bidder may be bidding both price and volume. Thus, it would be desirable to have a system that allowed a bidder to easily and quickly change any aspect of his bid, not just price.
Therefore, what is needed is a method of entering and adjusting bids that allows the bidder to easily set or change any aspect of the bid and submit the bid into an electronic auction.